In Japan, Shinzo Abe Backs Down—and Loses a Big Abenomics Allyby
Shinzo Abe’s third arrow needs some sharpening. The Japanese prime minister has a three-pronged plan to revive the world’s third-largest economy. Abe calls them his three arrows and he’s already fired the first two, with the government boosting spending and the Bank of Japan increasing the money supply.
Arrows No. 1 and No. 2 have helped weaken the yen and improve corporate earnings. Arrow No. 3, targeting structural reforms to ease restrictions on labor, agriculture, health care, and tourism, was always going to be trickiest for Abe. The status quo hurts Japanese consumers while it suiting powerful interests in those industries just fine, thanks.
That’s why the news from Tokyo that Japan’s third-richest man has turned against Abe is a discouraging sign that the prime minister may not be up to the challenge of implementing Abenomics. Hiroshi Mikitani is the chairman of Rakuten, Japan’s biggest e-commerce company, which is a leading investor in Pinterest and owner of the Kobo e-reader. Mikitani has his hands full trying to take on Amazon worldwide while fending off an aggressive challenge from Masayoshi Son of Softbank at home.
Now Mikitani has a new fight, this time against the prime minister and his cabinet. Kenko.com, a Rakuten unit that calls itself the No. 1 e-drugstore in Japan, yesterday revealed it is going to court following a move by Abe’s cabinet to restrict online sales of some over-the-counter drugs.
“This is an unreasonable and archaic principle they are trying to stick to,” the billionaire told reporters yesterday. “It goes totally against Abe’s policies. I cannot forgive this.”
It’s easy to see why Mikitani is frustrated. What’s involved is a typical example of entrenched interests using their clout to thwart consumers. In this case, the Japan Pharmaceutical Association and its 100,000 pharmacists argue that there are greater risks of side effects from medicines sold online. Among them, the Yomiuri Shimbun reported last week, are such mundane medicines as Allegra FX, the antihistamine, and painkiller Loxonin S.
Mikitani’s fight with Abe comes at a difficult time for the prime minister. While the yen has weakened and deflation is ending, Japanese consumers aren’t yet in the mood to spend; the Bank of Japan revealed last week that a record 31 percent of households have no financial assets. That’s up from 26 percent a year ago and it’s the highest since the central bank first started surveying the subject in 1963. Regular wages—excluding overtime and bonuses—dropped .03 percent in September, the 16th consecutive month of falling pay for Japanese workers. Meanwhile, the government is raising the consumption tax next year, potentially dampening consumer spending further.
Given the challenges ahead, Abe will need support from business leaders such as Mikitani. The prime minister has lost a valuable ally, but at least Abe can take solace knowing he has protected Japanese consumers from the perils of buying allergy and headache medicines online.